Well-Structured, Custom Financial Solutions for Small and Medium-Sized Businesses (PART II OF III)

As illustrated last week, US Capital Partners structures and provides custom, market-leading financing solutions for the following common special situations: (1) complex company structures, (2) businesses outside the United States, and (3) concentration risk and foreign customer risk.

Part II explores three further special situations that render business financing challenging for most traditional lenders, by increasing risk and complexity. Examining transactions on a case-by-case basis, US Capital Partners offers intelligently structured, custom financial solutions for smaller businesses, especially in these situations.

4. Ratio of Inventory to Accounts Receivable “Upside Down”

With sales ready to escalate following TV celebrity endorsements, a developer of personal massagers required additional working capital to support its inventory needs. The challenge was that the company’s ratio of inventory to accounts receivable was “upside down.” Companies with significantly higher inventory than accounts receivable are generally declined by traditional lenders. In this case, US Capital Partners provided an accounts receivable line of credit scalable to $5 million for the firm, together with a $1 million inventory line of credit.

5. Specialized Enterprises and Criticized Industries

AdJuggler, Inc., a software-as-a-service company, required flexible and scalable financing to support its ongoing growth. Many traditional bank lenders lack the expertise and experience to fund certain specialized enterprises, such as online advertising and software-as-a-service companies. They are therefore able to offer only limited financing flexibility. However, US Capital Partners was able to provide a flexible $1.25 million credit facility for this enterprise.

US Capital Partners regularly provides best-in-class funding even for businesses in industries that are generally difficult to finance. For instance, US Capital Partners provided $2.8 million in refinancing for SpecPrint, a family-run custom printing business. SpecPrint’s lender was looking to exit because the business had suffered declining sales and was operating in a criticized industry, printing.

6. Pre-Revenue Business; Lack of Historical Performance

Electronic Polymers Newco, Inc. had pioneered a new technology at a lower cost and footprint than competing products. The time had come for the company to move from an R&D facility to a manufacturing facility, and it approached US Capital Partners for assistance. Although Electronic Polymers Newco was a pre-revenue business and lacked cash-flow and debt service, US Capital Partners was able to provide a $700,000 machinery and equipment term loan to support the next stage of the company’s growth.

Many businesses are in their early stages, and may not have many years of historical performance. Traditional banks may therefore be hesitant to lend to them. However, US Capital Partners offers cash-flow term loans and other financing options to such businesses, even if they have less than $5 million in trailing EBITDA—which used to be the threshold for such loans.